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DVD and DVD recorder section of Best Buy on Harrison st.
Story on DVD recorders and how they are taking over vhs recorders San Francisco,CA on 10/13/04
San Francisco Chronicle/Chris Hardy MANDATORY CREDIT FOR PHOTOG AND SF CHRONICLE/ -MAGS OUT Business#Business#Chronicle#10/18/2004#ALL#5star##0422411045

Photo: Chris Hardy

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DVD and DVD recorder section of Best Buy on...

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A stack of Tivos in the Best Buy store on Harrison.
Story on DVD recorders and how they are taking over vhs recorders San Francisco,CA on 10/13/04
San Francisco Chronicle/Chris Hardy MANDATORY CREDIT FOR PHOTOG AND SF CHRONICLE/ -MAGS OUT Business#Business#Chronicle#10/18/2004#ALL#5star##0422411041

Photo: Chris Hardy

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A stack of Tivos in the Best Buy store on...

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Large plasma TVs most hooked up to DVD recorders or Tivos at Best Buy on Harrison.
Story on DVD recorders and how they are taking over vhs recorders San Francisco,CA on 10/13/04
San Francisco Chronicle/Chris Hardy MANDATORY CREDIT FOR PHOTOG AND SF CHRONICLE/ -MAGS OUT Business#Business#Chronicle#10/18/2004##5star##0422411042

The giants of the computer industry and consumer electronics are battling for control of the home entertainment universe. In the process, they are resorting to a common strategy -- persuading couch potatoes to junk their old VCRs and switch to new tapeless digital video recorder technologies.

Indeed, couch potatoes will have many more options available for the holiday buying season to replace their dusty stacks of analog video tapes, even though average viewers don't fully understand all the features that are possible with digital video.

In the past year, companies that have long controlled home entertainment, like Sony, Panasonic, Samsung, JVC and Pioneer, have begun filling store shelves with new DVD players that can also record shows on blank DVDs.

Cable companies like Comcast have also begun offering a TiVo-style digital video recorder to beef up service to compete with satellite TV services like DirecTV.

Last week, computer industry powerhouses like Microsoft, Intel, Hewlett- Packard and Dell rolled out a new generation of personal entertainment computers and related devices capable of recording TV shows on hard drives for viewing on any number of home and portable devices.

Not to be outdone by the competition, TiVo Inc. -- the Bay Area firm whose name has become synonymous with digital video recording -- introduced a new $400 model that combines TiVo's signature personal video recording service with both a hard drive for temporary recording and a DVD recorder to create a permanent copy.

"This is the first one that is really a replacement for the VCR," said Bob Poniatowski, a TiVo product marketing manager.

The video cassette recorder was introduced in the 1970s and over time became as standard a component for home entertainment as TV and radio. The VCR performed a simple-to-understand function: It recorded TV shows for later viewing and played back pre-recorded movies, even though many consumers never learned how to set its clock.

DVD rapidly replaces VCR

In 1997, the introduction of the DVD player, which could play pre- recorded DVD movies but not record, began a widespread consumer shift away from the VCR. About 55 percent of U.S. households have a DVD player, making it the fastest-selling home electronics device in history.

Annual sales of DVD players are expected to reach nearly 25 million this year. By contrast, annual U.S. sales of VCRs, which peaked at about 23 million in 2000, have plummeted to a projected 4 million for 2004, said Consumer Electronics Association spokesman Jim Barry.

Although DVD players replaced VCRs to play back movies because of their superior picture quality, they still couldn't record TV shows. Digital video recorder products like TiVo and ReplayTV stored shows on hard drives, but until more recently, could make a permanent archive copy only by exporting the video to a VCR.

Efforts to persuade buyers

Computer-makers tried to bridge that gap by including recordable DVD drives and software to record TV shows, but have not been successful at persuading mainstream consumers to connect their PCs to their TVs.

Last year, makers of consumer electronics believed they had found an answer by shipping combination DVD player-recorders that cost $600 to $1,000. However they did not sell well because the cost was far above the "sweet spot" price of $200 to $300 that made regular DVD players best sellers.

In addition, many customers backed away when they learned DVD recorders could not copy prerecorded DVD movies, which is a copyright violation and which is blocked by software on the players and the DVD, said Patrick Hutchins, business manager for the Best Buy outlet in downtown San Francisco.

"They came in here with that intent in mind, and when they learned they can't do that, it was a big turnoff," Hutchins said. "People felt that was justified if they were going to spend $600."

This year, however, prices have dropped to as little as $200, and the selection of DVD recorder models has increased from about four last year to more than 10 so far this year, Hutchins said. The store is already making room for more.

Meanwhile, DVD recorders are pushing VCRs off the shelves. The same store only had three VCRs on display, and "demand for these has gone way down," Hutchins said.

Tony Vella, a Pacifica resident who has a PC with a DVD burner, was at the Best Buy outlet, looking for a stand-alone DVD recorder that was more simple to use.

"I have a lot of VHS home videos and movies I want to transfer over," said Vella, who added that he is taking his time researching to get all the features he wants.

Tech giants tout EPCs

Meanwhile, PC-makers like Hewlett-Packard and Dell are stepping up their efforts to persuade consumers to use computers to record video using a new generation of entertainment computers, or EPCs. These desktops, which cost as much as $2,000, are designed to look like a DVD player or stereo receiver and run on Microsoft's Windows XP Media Center 2005 operating system.

Unlike regular computers designed for word processing and productivity, entertainment PCs make the priority the playback and storage of digital media such as music, photos and TV shows. They are designed to be connected directly to the TV and come with a TV-style remote control. They will be marketed in the home entertainment sections of retail stores next to TVs and DVD players, not next to other computers.

It's part of a larger strategy backed by Silicon Valley companies like Intel Corp. to make the computer the center of home entertainment. Digital video helps sell all the major components the valley has to offer -- faster, more powerful microprocessors; more storage space on hard drives or flash memory chips; new video management software; better video display monitors and graphics cards; and more networking equipment to transfer files.

Previous versions of entertainment PCs have not sold well, but computer executives think mass adoption of digital music and digital photography has finally primed the market for digital video recording, whether with a DVD recorder, TiVo or a computer.

"Consumers are increasingly understanding digital photography and how to store digital photos on their PC," said Mike George, vice president and chief marketing officer for Dell Inc. "They understand how to download music on their PCs and send it to an MP3 player." Dell plans to sell a scaled-down version of the entertainment PC for as little as $600.

DVD recorders and entertainment PCs also offer digital video recording without charging a subscription fee for the service. That creates more competition for TiVo, which charges a subscription fee of $12.95 per month or $299 for the lifetime of the unit in addition to the purchase price of a TiVo box.

Consumers balk at fees

TiVo critics say the company's success has been limited because consumers don't understand why they should pay additional subscription fees after buying a device. TiVo, based in Alviso, has attracted only about 2 million subscribers since it helped introduce digital video recording in 1999, but this year it has tried to attract more customers by dropping the purchase price of basic hard drive recorders to as low as $100 with rebates.

Last week, TiVo unveiled a new combination DVD recorder with a hard drive manufactured by South Korea's Humax Co. Ltd. TiVo officials believe the $400 price, after a $100 rebate, combined with the chance to archive favorite TV shows on a DVD, could be the tipping point to get consumers to unplug their VCRs. Toshiba is introducing a similar TiVo-DVD recorder.

The combination DVD recorder-hard drive units, such as the new Humax TiVo, are "the most interesting category" of new digital video recorders because they are "an elegant way to store, edit and then burn a video," analyst Rob Sanderson said.

Such devices should help TiVo compete in an expanding digital video recording market, although the question is "how much of that wave can they catch," he said.

A bigger problem for TiVo and other makers of digital video recorders in general is educating consumers about their advantages. So far, cable and satellite TV services have done a better job of marketing digital video recorders as part of their services and could grab 80 percent of the market by 2009, said Michael Gartenberg, research director for Jupiter Research.

However, he added, a consumer survey provides some hope for makers of stand-alone and computer video recorders.

"Forty-one percent of consumers do not have a preference as to where they would get DVR technology or who would provide service," Gartenberg said. "This provides a growth opportunity for the first DVR provider that educates the market correctly."